IB Options Brief: MetroPCS Communications, Inc. (PCS) & Capital One Financial Corp. (COF)

Posted January 4th, 2012 by Caitlin Duffy in Unusual Activity

PCS ñ MetroPCS Communications, Inc.
The wireless communications providerís shares lost 3.8% in the first half of the session to trade at $9.03, reversing sharp gains enjoyed in the first trading session of 2012. Activity in MetroPCS options today suggests one player is positioning to benefit from further pain in the next few weeks.

More than 7,000 in-the-money put options changed hands at the Jan. $10 strike against paltry previously existing open interest of just 230 contracts. The majority of the put options were purchased by one investor in a block of 4,475 contracts within minutes of the opening bell for a premium of $1.20 apiece.

Bearish put buying on MetroPCS may pay off for the trader come January expiration should the price of the underlying fall another 2.5% to breach the effective breakeven price of $8.80. Shares in the name ended 2011 below $8.80, wrapping up the calendar at a 54.0% discount to its May 19, 2011, 52-week high of $18.79.

COF ñ Capital One Financial Corp.
The financial services provider popped up on our scanners this morning due to near-term bullish activity in its options. Though off their highs of the session, shares in Capital One remain in the green, up 1.60% at $44.45 as of 1:05 PM on the East Coast. One investor positioning for COFís shares to extend gains purchased the Jan. $44/$46 bull call spread roughly 3,400 times at a net premium of $0.75 per contract.

The trader may profit at expiration in the event that Capital Oneís shares exceed the effective breakeven price of $44.75. Shares in the name must rally another 3.5% to top $46.00 at expiration day in order for the investor to walk away with maximum potential profits of $1.25 per contract. Investors will have the opportunity to trade January í20 2012 expiry call options in one final session following COFís fourth-quarter earnings release after the final bell on January 19.

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